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Different Tax
Regimes

Normal Tax Regime Separate Block Final Tax Regime

NTR SBI FTR

✓ Under this regime Following income are

Following incomes are
income from chargeable under NTR:
charged under SBI
different sources ✓ Dividend Income
✓ Gain on disposal of
falling under NTR ✓ Fee for technical
immoveable
are added together service earned by
property
to calculate Total non-resident.
✓ Gain on disposal of
Income. ✓ Profit on debt in
securities
✓ Relevant rate for certain cases
Separate rate is
salaried or non- Under this regime tax
available for each head.
salaried individual will be deducted at the
will be applied time of transaction by
applying rate on gross
receipt normally.

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Deductible allowances (Sec 60, 60A, 60B, 60C & 60D)

Taxable income of a person for a tax year shall be the total income other than exempt
income of the person reduced (but not below zero) by following deductions.
1. Zakat
2. Workers’ welfare fund
3. Workers’ participation fund
4. Profit on deb
5. Education expenses
6. Donations under Clause 61 Part I of Second Schedule.

Zakat (Sec 60)

A person is entitled to a deductible allowance for the amount of any Zakat paid by the
person in a tax year under the Zakat and Ushr Ordinance, 1980.
Where the Zakat has been deducted out of the profit on debt (which is chargeable under
the head “income from other sources”), such Zakat shall not be deducted out of the total
income, rather, it shall be allowed as a deduction while computing income from other
sources.
Where the amount of Zakat is more than total income, the excess amount shall not be
refunded or carried forward or carried back.
Worker’s welfare fund (Sec 60A)
A person shall be entitled to a deductible allowance for the amount of any Workers’
Welfare Fund (WWF) paid by the person in the tax year under Workers’ Welfare Fund
Ordinance, 1971.
Worker’s participation fund (Sec 60B)
A person shall be entitled to a deductible allowance for the amount of any Workers’
Participation Fund paid by the person in a tax year in accordance with the provisions of
the Companies Profit (Workers’ Participation) Act, 1968.

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Profit on debt [Sec. 60C]

Every individual shall be entitled to a deductible allowance for profit or share in rent and
share in appreciation for value of house paid in the year on a loan received from a:
1. scheduled bank or
2. nonbanking finance institution or
3. Government or
4. the Local Government or
5. the Provincial Government or
6. statutory body or
7. public company listed on a registered stock exchange in Pakistan
The loan should be used for:
▪ the construction of a new house or
▪ the acquisition of a house.
The allowance allowed shall be lower of:
(a) profit paid by the person in the year
(b) 50% of taxable income or
(c) Rs. 2,000,000.
An allowance which is not able to be deducted shall not be carried forward to a subsequent year.

Allowance for educational expenses [Sec. 60D]

Every individual is entitled to a deductible allowance for tuition fee paid if the taxable
income of individual is less than Rs. 1,500,000.
The allowance allowed shall be lower of:
(a) 5% of the total tuition fee paid by the individual in the year;
(b) 25% per cent of the person’s taxable income for the year; and
(c) an amount computed by multiplying Rs. 60,000 with number of children of individual.
An allowance which is not able to be deducted shall not be carried forward to a
subsequent year.
Allowance shall be allowed to either of the parents on furnishing national tax number
(NTN) or name of the educational institution.

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Tax credit for certain persons [Sec 65F]

(1) Following taxpayers shall be allowed 100% tax credit (including minimum tax and final
taxes) upon fulfillment of certain conditions/limitations:
(i) Persons engaged in coal mining projects in Sindh supplying coal to power generation
projects;
(ii) A startup (as defined in Clause (62A) of Section 2) which is certified by the Pakistan
Software Export Board. Credit will be allowed in the year of startup and for the
following two years;
(iii) Persons deriving income from exports of computer software or IT services or IT enabled
services up to the period ending on 30 June 2025 if 80% of the export proceeds are
brought into Pakistan in foreign exchange through normal banking channel.
(2) Following are the conditions:
(i) Annual return of income has been filed.
(ii) Withholding tax statements for relevant tax year have been filed, if person is
withholding agent; and
(iii) Monthly sales tax returns for the tax periods (corresponding to the relevant tax year)
have been filed.

Donations allowed as straight deduction [Clause 61 Part I of Second Schedule]

Donations made to institutions specified in Clause 61 Part I of Second Schedule are allowed
as straight deduction from total income.
Examples.
✓ Shaukat Khanum memorial trust, Lahore.
✓ Pakistan Red Crescent Society.
This clause shall apply only if donation is paid by a crossed cheque drawn on a bank.
The donation will be allowed as deduction at lower of:
a. Actual amount of donation
b. 30% of taxable income for individual and AOP and 20% of taxable income for
company.
If amount is donated by an associate limit shall not exceed:
1. for an individual or AOP, 15% of taxable income
2. for a company, 10% of taxable income.

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Computation of taxable income.

Income from Salary W-1 XXX
Income from property (PSI+FSI) W-2 XXX
Income from business (PSI+FSI) W-3 XXX
Capital gain (PSI+FSI) W-4 XXX
Income from other sources (PSI+FSI) XXX
Total Income XXX
Less income Separate Block Income (XXX)
Immovable property & Securities (XXX)
Less Deductible allowances (XXX)
Zakat (XXX)
Worker’s welfare fund (XXX)
Worker’s participation fund (XXX)
Profit on debt (XXX)
Allowance for educational expenses (XXX)
Donations under Clause 61 Part I of Sch (XXX)
Taxable Income (XXX)

Computation of taxable income.

Where the income of
Income from Salary W-1 890,000
an individual
Income from property (PSI+FSI) W-2 200,000
chargeable under the
Income from business (PSI+FSI) W-3 100,000
head ―salary exceeds
Capital gain (PSI+FSI) W-4 50,000
seventy-five per cent
Income from other sources (PSI+FSI) 110,000
of his taxable income,
Total Income 1,350,000
person is called
Less income Separate Block Income
salaried Individual.
Immovable property & Securities
Less Deductible allowances Salaried -Correct
Zakat 75,000 =890,000/1,170,000
Worker’s welfare fund 20,000 76%
Worker’s participation fund 5,000
Profit on debt 50,000 Salaried - wrong
Allowance for educational expenses 30,000 (180,000) =890,000/1,350,000
Donations under Clause 61 Part I of Sch 65.9%
Taxable Income 1,170,000

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Computation of taxable income.

Income from Salary W-1 2,500,000
Income from property. W-2 250,000
Income from business W-3 200,000
Capital gain-NTR W-4 100,000
Income from other sources-NTR 300,000
Total Income 3,350,000
Less Deductible allowances
Zakat 500,000
Worker’s welfare fund 50,000
Worker’s participation fund 75,000
Profit on debt 300,000
Allowance for educational expenses 30,000 (955,000)
Taxable Income 2,395,000

Deductible allowance vs Tax credit

Deductible Allowance Tax Credit

Amount of deductible allowance is Amount of tax credit is not deducted

deducted from Income which means from Income rather a tax credit on
No tax will be calculated on it. average rate of tax is allowed as a
deduction of tax liability..

Tax on Taxable Income

Average rate of tax =
Taxable Income

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Total Income- Non Salaried Rs.2,300,000

Calculate his tax liability if Rs. 300,000 is allowed as
Deductible allowance?
Eligible for tax credit?

Deductible allowance Total Income 2,300,000

Total Income 2,300,000 Deductible allowance -
Deductible allowance 300,000 Taxable Income 2,300,000
Taxable Income 2,000,000 Tax 235,000
Tax 190,000 (70,000+1,100,000 x 15%)
(70,000+800,000 x 15%) Tax credit =235,000/2,300,000 x 300,000
(30,652)
Tax liability 204,384

Charitable Donations Sec -61 Tax Credit = (A/B) x C Conditions

A person shall be entitled to a tax C is the lower of 1. The fair market
1. the amount of the donations in the value of property
credit for a tax year for amount paid or year, including the fair market value shall be
property given as a donation to: of property given determined at the
(a) any board of education or any where the person is – time it is given.
a) an individual or AOP, 30% of taxable 2. Cash paid will only
university in Pakistan established income qualify for tax
by, or under, a Federal or a b) a company, 20% of taxable income credit if amount is
Provincial law; If amount or property is donated by paid by a crossed
associate C shall be in the case of – cheque.
(b) any educational institution, a. an individual or AOP, 15% of taxable
hospital or relief fund established income
in Pakistan by Federal, Provincial or b. a company, 10% of taxable income
a Local Government; or
(c) any non-profit organization.

A- is the amount of tax payable for the tax year before allowance of any tax credit.
B- is the person’s taxable income for the tax year.

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Mr. Kamran has disclosed taxable income from Salary of Rs. 2,500,000 and from
property 200,000 for TY 2022. Zakat paid during the year under Zakat and usher
ordinance was Rs 100,000 and donation to charitable institutions Rs 500,000. Calculate
tax liability for tax year 2022?
Total Income 2,500,000+200,000 2,700,000
Deductible Allowances
Zakat paid (100,000)
Taxable Income 2,600,000
Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for donation
A/B x C 212,500/2,600,000 x 500,000 (40,865)
Donation 500,000
30% of taxable income 780,000
Tax Payable 171,635

Investment in shares or life insurance-62 Tax Credit = (A/B) x C Conditions

A resident person other than a company C is the lower of ▪ Where –a tax credit has been
shall be entitled to a tax credit for a tax year (a) the cost of allowed for shares purchased;
acquiring the and the person has made
either: shares, or sukuks disposal of the shares within
i) if it has acquired new shares offered to or the contribution 24 months of date of
public by a public company listed on a or premium paid acquisition, the tax for the tax
stock exchange in Pakistan. The person by the person year in which shares were
should be original allottee of the shares, (b) 20% of the taxable disposed of shall be increased
income or by the credit allowed.
or if it has acquired shares from (c) Rs. 2,000,000 ▪ Further where a tax credit has
Privatization Commission of Pakistan; been allowed for life
ii) on cost of acquiring sukuks offered to insurance premium paid and
public by a public company listed on a the insurance policy is
stock exchange in Pakistan. The person surrendered within 2 years of
its acquisition, the tax credit
should be original allottee of the sukuks allowed shall be deemed to
iii) for life insurance premium paid to a life have been wrongly allowed
insurance company registered by SECP if and the Commissioner shall
he is deriving income from salary or recompute the tax payable for
business. the relevant tax year.

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Mr. Kamran has disclosed his taxable income from Salary of Rs. 2,500,000 and from property
200,000 for TY 2022. Zakat paid during the year under Zakat and usher ordinance was Rs
100,000 and has acquired new shares offered to public by a public company listed on a stock
exchange in Pakistan for Rs 1,000,000. Calculate his tax liability for TY 2022?
Total Income 2,500,000+200,000 2,700,000
Deductible Allowances
Zakat paid (100,000)
Taxable Income 2,600,000
Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 520,000 (42,500)
Investment in shares 1,000,000
Lower
20% of taxable income 520,000
Of
Maximum 2,000,000

Mr. Kamran has disclosed his taxable income from Salary of Rs. 2,500,000 and from property
200,000 for TY 2022. Zakat paid during the year under Zakat and usher ordinance was Rs
100,000 and has paid Rs 600,000 as life insurance premium to a life insurance company
registered by SECP. Calculate his tax liability for TY 2022?
Total Income 2,500,000+200,000 2,700,000
Deductible Allowances
Zakat paid (100,000)
Taxable Income 2,600,000
Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 520,000 (42,500)
Life insurance pre. 1,000,000
Lower
20% of taxable income 520,000
Of
Maximum 2,000,000

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Mr. Kamran has disclosed his taxable income from Salary of Rs. 2,500,000 and from property
200,000 for TY 2022. Zakat paid during the year under Zakat and usher ordinance was Rs
100,000 and has paid Rs 200,000 as life insurance premium to a life insurance company
registered by SECP. He also acquired new shares offered by listed Co for Rs 500,000.
Calculate his tax liability for TY 2022?
Total Income 2,500,000+200,000 2,700,000
Deductible Allowances
Zakat paid (100,000)
Taxable Income 2,600,000
Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 520,000 (42,500)
Life insurance pre. 200,000 Investment in sharers 500,000
Lower
20% of taxable income 520,000 20% of taxable income 520,000
Of
Maximum 2,000,000 Maximum 2,000,000

Investment in health insurance-62A Tax Credit = (A/B) x C Conditions

A resident person other than a C is the lower of
company shall be entitled to a tax (a) the total contribution or premium
paid in the tax year;
credit for a tax year for health (b) 5% of the taxable income; and
insurance premium or contribution (c) Rs. 150,000
paid to any insurance company
registered by SECP if the person is
deriving income from salary or
business.

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Mr. Kamran has disclosed his taxable income from Salary of Rs. 2,500,000 and from property
200,000 for TY 2022. Zakat paid during the year under Zakat and usher ordinance was Rs
100,000 and has paid health insurance premium of Rs 200,000. Calculate his tax liability for
TY 2022?
Total Income 2,500,000+200,000 2,700,000
Deductible Allowances
Zakat paid (100,000)
Taxable Income 2,600,000
Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 130,000 (10,625)
Health Insurance 200,000
Lower
5% of taxable income 130,000
Of
Maximum 150,000

Approved Pension Fund

If joined If joined
▪ Up to age of 40 years or ▪ At 41 years or above and
▪ Contribution paid after ▪ Contribution paid till
TY 2019. TY 2019

C is the lower of C is the lower of

a. The premium paid by the a. The premium paid by the person in the year
person in the year b. 20%, plus additional 2% per year of age if
b. 20% of the taxable income of age is 41 years or above, the taxable income
the person for relevant tax year. of the person for relevant tax year.
c. 30% of the taxable income of previous year

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Contribution to approved Tax Credit = (A/B) x C Conditions

pension fund S-63

An eligible person earning income C is the lower of The transfer by

from salary or business shall be a. the premium paid by the person the members
allowed a tax credit for premium in the year of old schemes
paid in approved pension fund b. 20% of the taxable income of of their old
under the Voluntary Pension the person for relevant tax year. balance to the
System Rules, 2005. "Eligible However if he joins the pension new individual
Person" means an individual fund at the age of 41 years or above pension
Pakistani who holds a valid National he shall be allowed additional account shall
Tax Number or Computerized NIC contribution of 2% per annum for not qualify for
or NIC for Overseas Pakistanis each year of age exceeding 40 years tax credit
issued by NADRA. (upto the 30th June, 2019).
However total contribution shall not
exceed 30% of the taxable income
of previous year

Contribution to approved pension fund S-63 Tax Credit = (A/B) x C Conditions

For Tax Year 2020 and onwards.
An eligible person earning income C is the lower of The transfer by
from salary or business shall be a. the premium paid by the the members of
allowed a tax credit for premium paid person in the year old schemes of
in approved pension fund under the b. 20% of the taxable income their old balance
Voluntary Pension System Rules, 2005. of the person for relevant to the new
"Eligible Person" means an individual tax year. individual
Pakistani who holds a valid National pension account
Tax Number or Computerized NIC or shall not qualify
NIC for Overseas Pakistanis issued by for tax credit
NADRA.

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Mr. Anzar has disclosed taxable salary income of Rs. 2,600,000 for TY 2017. He also informed
you that he joined the pension fund at the age of 43 years in TY 2017 by paying Rs. 690,000
as contribution. His taxable income for TY 2016 is Rs. 2,000,000. Required: Calculate his tax
liability.
Total Income 2,600,000
Deductible Allowances-
Not given in question

Taxable Income 2,600,000

Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 600,000 (49,038)
Contribution 690,000
Lower
26% of taxable income 676,000
Of
30% of previous year 600,000

Mr. Anzar has disclosed taxable salary income of Rs. 2,600,000 for TY 2022. He also informed
you that he joined the pension fund at the age of 43 years in TY 2017.In TY 2022 he
contributed in pension fund Rs 690,000. Required: Calculate his tax liability for TY 2022?

Total Income 2,600,000

Deductible Allowances-
Not given in question

Taxable Income 2,600,000

Tax on Taxable Income 195,000+ 100,000 x 17.5% 212,500
Tax Credit for Investment
A/B x C 212,500/2,600,000 x 520,000 (42,500)
Contribution 690,000
Lower
20% of taxable income 520,000
Of

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Contribution to approved pension fund S-63 Tax Credit = (A/B) x C Conditions

An eligible person earning income C is the lower of The transfer by
from salary or business shall be (a) the premium paid by the the members of
allowed a tax credit for premium paid person in the year old schemes of
in approved pension fund under the (b)20% of the taxable income of their old balance
the person for relevant tax
Voluntary Pension System Rules, 2005. to the new
year. However if he joins the
"Eligible Person" means an individual individual
pension fund at the age of 41
Pakistani who holds a valid National years or above he shall be pension account
Tax Number or Computerized NIC or allowed additional shall not qualify
NIC for Overseas Pakistanis issued by contribution of 2% per annum for tax credit
NADRA. for each year of age exceeding
40 years (upto the 30th June,
2019). However total
contribution shall not exceed
30% of the taxable income of
previous year.

Mr. Anzar has disclosed taxable income of Rs. 1,800,000 for TY 2017. He also informed you
that he joined the pension fund at the age of 43 years in TY 2017 by paying Rs. 490,000 as
contribution. His taxable income for TY 2016 is Rs. 900,000.
Total Income 1,800,000
Deductible Allowances Not given
Taxable Income 1,800,000
Tax on Taxable Income 70,000 + 15% x 600,000 160,000
Tax Credit U/S 63 W-1 (24,000)
Tax Payable 136,000

W-1 Premium paid Lower of 490,000

26% of current year TI 468,000
30% of previous year TI 270,000 (31,500)
Tax Credit U/S 63 160,000/1,800,000 x 270,000 24,000

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Tax credit to persons employing fresh Tax Credit = (A/B) x C Conditions

graduates .
A person employing freshly qualified C is the lower of The tax credit
graduates from a: a) the annual salary paid to shall be allowed
▪ university or the freshly qualified for salary paid to
▪ institution recognized by Higher graduates in the year; and the number of
Education Commission b) 5 % of the person's taxable freshly qualified
Shall be entitled to a tax credit for income for the year graduates not
annual salary paid to the graduates for exceeding 15% of
a tax year in which such graduates are the total
employed. employees of the
"Freshly qualified graduate" means a company in the
person who has graduated after the tax year
1.July.2017 from any institution or
university recognized by the Higher
Education Commission.”

Deduction / Mr. Noman has disclosed total income of Rs. 2,200,000 for TY 2021. He has
Tax Credit further disclosed the following:-
1. He has made donation of Rs. 50,000 to non-profit organization through
cross cheque.
2. Paid Zakat of Rs. 200,000.
3. He purchased shares of a new company listed on a registered SE in
Pakistan for Rs. 90,000. These were purchased on 15-7-2020.
4. He contributed Rs. 70,000 in an approved pension fund.
5. He paid interest on house loan amounting to Rs. 120,000.
Required: Calculate tax liability for TY 2021?

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Total Income 2,200,000

Deductible Allowances
Zakat paid 200,000 2,000,000
Profit on debt- Lower of 120,000 0r 50% 2,000,000 120,000
Taxable Income B 1,880,000
Tax on Taxable income 70,000+ 680,000 x 15% A 172,000
Tax Credit
U/S 61 (A/B x C) C is lower of (50,000 or 4,574
=172,000/1,880,000 x 50,000 30% of 1,880,000)
U/S 62 (A/B x C) C is lower of (90,000 or 20% of 8,234
172,000/1,880,000 x 90,000 1,880,000 or 2,000,000)

U/S 63 (A/B x C) C is lower of (70,000 or 20% of 6,404

172,000/1,880,000 x 70,000 1,880,000)

Foreign tax credit [Sec. 103]

1. Where a resident taxpayer derives taxable foreign source income on
which foreign income tax is paid, a tax credit will be allowed at lower of –
(a) the foreign income tax paid; or
(b) the Pakistan tax payable in respect of the income.
foreign income tax includes a foreign withholding tax
2. The Pakistan tax shall be calculated by multiplying the average rate of
Pakistan income tax to the net foreign source income.
Average rate of Pakistan income tax is the % that Pakistani income tax is of
the taxable income for the year;
Net foreign-source income means the total chargeable foreign-source
income less deductions allowed that relate exclusively and can reasonably be
allocated to the derivation of the foreign-source income.

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3. Where a taxpayer has foreign income under more than one head, calculation for each
head of income shall be separately made.
4. For above provision, speculation business shall be treated as a separate head of
income.
5. Following is the order for tax credits:
(a) foreign tax credit (allowed under section 103); then
(b) tax credit allowed on charitable donations, tax credit for investment in shares and
insurance, tax credit for investment in health insurance and tax credit on
contribution to approved pension fund (u/s 61- 63); and then
(c) tax credit for advance tax paid (u/s 147).
(6) The foreign tax credit shall not be:
▪ refunded,
▪ carried back to the preceding tax year, or
▪ carried forward to the following tax year.
(7) A credit shall be allowed only if the foreign income tax is paid within 2 years after the
end of the tax year in which the foreign income was derived. Practically speaking foreign
tax credit

Foreign and Local Tax credit Rs.

Pakistani Source Income
Salary
Average rate for
Income from business
foreign tax credit.
Capital Gain-NTR
Foreign Source Income
Business Income
Average rate for
Capital Gain
Local tax credit.
Total Income
Deductions
Taxable income A
Tax on Taxable income including FSI B
Foreign Tax Credit = B/A
Tax liability after foreign tax credit C
Local Tax Credits = C/A

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Mr. Aslam has disclosed the following information for TY 2021.

Income from business – Pakistan 1,500,000
Income from business – UK 500,000
Income from capital gain – Pak 300,000

Foreign tax paid in UK. 30,000

Charitable Donation. 100,000
Zakat paid. 50,000
Required: Calculate tax liability?

Foreign and Local Tax credit Rs.

Pakistani Source Income
Income from business 1,500,000
Capital Gain-NTR 300,000
Foreign Source Income
Business Income-UK 500000
Total Income 2,300,000
Deductions
Zakat (100,000)
Taxable income A 2,200,000
Tax on Taxable income including FSI B 220,000
(70,000+1,000,000 x15%)
Foreign Tax Credit W-1 (30,000)
Tax liability after foreign tax credit C 190,000
Local Tax Credits W-2 (8,636)
Net Tax payable 181,364

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Foreign Tax Credit (W-1)

Foreign Tax paid 30,000
Propionate Pakistani tax 220,000/2,200,000 x 500,000 50,000
Foreign Tax Credit 30,000

Tax Credit Charitable donation

Amount of donation 100,000
30 % of taxable income 2,200,00 660,000
Lower of two 190,000/2,200,000 x 100,000 8,636

Mr. Sultan has disclosed the following information for TY 2021.

Income from business – Pakistan 1,500,000
Income from business – UK 500,000
Capital gain – UK 200,000
Foreign tax paid in UK.
Business Income 30,000
Capital Gain 50,000
Required: Calculate tax liability?

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Foreign and Local Tax credit Rs.

Pakistani Source Income
Income from business 1,500,000
Foreign Source Income
Business Income-UK 500000
Capital Gain 200,000
Total Income 2,200,000
Taxable income A 2,200,000
Tax on Taxable income including FSI B 220,000
(70,000+1,000,000 x15%)
Business Income-Foreign Tax Credit W-1 (30,000)
Capital Gain-Foreign Tax Credit W-2 (20,000)
Net Tax payable 170,000

Business Income -Foreign Tax Credit (W-1)

Foreign Tax paid 30,000
Propionate Pakistani tax 220,000/2,200,000 x 500,000 50,000
Foreign Tax Credit 30,000

Capital Gain -Foreign Tax Credit (W-2)

Foreign Tax paid 50,000 50,000
Propionate Pakistani tax 220,000/2,200,000 x 200,000 20,000
Foreign Tax Credit Lower of two 20,000

Foreign Tax Credit- Consolidated Income not allowed

Foreign Tax paid 50,000 80,000
Propionate Pakistani tax 220,000/2,200,000 x 700,000 70,000
Foreign Tax Credit Lower of two 70,000

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Mr. Sultan has disclosed the following information for TY 2021.

Income from business – Pakistan 1,700,000
Income from business – UK 500,000
Foreign tax paid in UK.
Business Income 40,000
Charitable donation 800,000
Required: Calculate tax liability for TY 2021?

Foreign and Local Tax credit Rs.

Pakistani Source Income
Income from business 1,700,000
Foreign Source Income
Business Income-UK 500000
Total Income 2,200,000
Taxable income A 2,200,000
Tax on Taxable income including FSI B 220,000
(70,000+1,000,000 x15%)
Business Income-Foreign Tax Credit W-1 (40,000)
Tax payable after FTC C 180,000
Charitable donation W-2 (54,000)
Net Tax payable 126,000

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Business Income -Foreign Tax Credit (W-1)

Foreign Tax paid 40,000
Propionate Pakistani tax 220,000/2,200,000 x 500,000 50,000
Foreign Tax Credit 40,000

Charitable donation (W-2)

Actual amount 200,000
30% of 2,200,000 660,000
Tax Credit 180,000/2,200,000 x 660,000 54,000

Mr. Sultan has disclosed the following information for TY 2021.

Income from business – Pakistan 2,200,000
Income from business – UK 800,000
Foreign tax paid in UK. 60,000
Charitable donation 500,000
Zakat Paid 600,000
Advance Tax deducted 100,000
Required: Calculate tax liability for TY 2021?

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 12/21/2021

Foreign and Local Tax credit Rs.

Pakistani Source Income
Income from business 2,200,000
Foreign Source Income
Business Income-UK 800,000
Total Income 3,000,000
Deductions
Zakat paid (600,000)
Taxable income A 2,400,000
Tax on Taxable income including FSI B 250,000
Foreign Tax Credit = B/A 60,000
Tax liability after foreign tax credit C 190,000
Local Tax Credits = C/A (39,583)
Advance tax deducted (100,000)
Net tax payable. 50,417

Business Income -Foreign Tax Credit (W-1)

Foreign Tax paid 60,000
Propionate Pakistani tax 250,000/2,400,000 x 800,000 83,333
Foreign Tax Credit 60,000

Charitable donation (W-2)

Actual amount 500,000
30% of 2,400,000 720,000
Tax Credit 190,000/2,400,000 x 500,000 39,583

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